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The Reserve Bank of India has imposed a monetary penalty of ₹10 crore on private sector lender HDFC Bank. This came after the RBI found irregularities based on a whistleblower complaint in the bank’s auto loan portfolio.
“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,” the RBI said in a statement on Friday.
The penalty is imposed for contravention of provisions of section 6(2) and section 8 of the Banking Regulation Act, 1949 (the Act), it further said.
An examination of documents in the matter of marketing and sale of third-party non-financial products to the bank’s customers, arising from a whistle blower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed, contravention of the provisions of the Act and the regulatory directions.
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“In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the provisions of the Act and directions,” the RBI further said said.
After considering the bank’s reply to the show cause notice, oral submissions made during the personal hearing and examination of further clarifications and documents furnished by the bank, RBI came to the conclusion that the aforesaid charge of contravention of provisions of the Act was substantiated and warranted imposition of monetary penalty, it further said.
Officials in the banks said they are in receipt of the RBI order and will abide by it.
HDFC Bank had last year conducted an internal investigation into allegations that customers of its car loans were being given GPS devices without their knowledge. The allegations had initially come up on social media.
The lender’s former Managing Director and CEO Aditya Puri at the annual general meeting on July 18 last year had confirmed that the bank conducted an inquiry into vehicle loans and appropriate action has been taken against employees involved in the misconduct. The incident had also led to the exit of a number of executives from the bank.
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